Business Inventories Rise .7%; Sales Flat

Business inventories rose 0.7% in May while sales were virtually flat, the government said today in further signs of slackening economic growth.

The Commerce Department said inventories held on shelves and back lots climbed to a seasonally adjusted $776.9 billion in May following a 0.8% rise in April.

Business sales, meanwhile, increased a minuscule 0.02% to a seasonally adjusted $517.9 billion after rising 2.0% in April. Sales had held steady in March after falling 0.9% in February, the steepest decline since January, 1987.

When not accompanied by increases in sales, rising inventories could threaten a recession by prompting manufacturers to cut back production until stockpiled goods are sold.

The May figures were further signs of a slowing economy, prompted by Federal Reserve credit-tightening measures designed to halt inflation. Business inventories often rise during periods of slow economic growth as production outpaces demand.

The Commerce Department’s retail sales figures for June, released Friday, showed a 0.4% decline as consumer spending remained sluggish, particularly for cars and other more costly durable goods. Sales also dropped 0.1% in May, producing the first monthly back-to-back drop since the September-October period of 1987.

The automobile industry has seen a recent buildup of unsold vehicles, and the Commerce Department said inventories rose 0.9% in May. It said sales were off 1.8% from April.

Wholesalers registered the only sales increase in May, up 0.5%.